BITCOIN

DannyCarey

Actually, (since you mention "the last couple of years"), if you had bought some bitcoin this time two years ago you would be sitting at about your entry price.. naturally there are huge reactive ups and downs, go back a further year and you would 3x up, even in the midst of everything that's going on right now.... 

User232002

Deleted_User said:

You're just showing that you don't get how modern currencies work.

Military spending and debt interest aren't in competition for the use of real resources (i.e. human labour and natural resources), because the latter is just a book-keeping exercise which doesn't use any significant real resources. And there is not a limited quantity of money per se (as opposed to real resources); more is created as required.

Paying a sub-inflation rate of interest is (very obviously) perfectly sustainable.

"Don't worry, we can print as much money as we want and it will all be perfectly OK."

Said by the same peole that told us over two years ago that printing several trillion dollars wouldn't lead to any meaningful inflation.

Nebulous2 said:

I’ve very limited knowledge of, and even less interest in Bitcoin. My son managed to fund 8 months backpacking on the sale of less than 1 Bitcoin that he mined (using my electricity) so I appreciate it has worked for some people. 

However paying interest at 4% while inflation is at 8 is a win for the Fed. Their debt is literally being inflated away.... 

Incorrect.

Its a short term win. Which is why no government in the world actually wants inflation to go away.

The problem is that in the long term it destroys faith in the currency. Inflation steals wealth from savers - if you continue to reward people and entities that take on lots of debt you are rewarding the wrong type of market participants.

Frequentlyhere said:

Have you thought about writing a column for Zerohedge, Darren? 

You alternately paint a picture of a Fed either raising interest rates so hard that it destroys pension funds or being so lax that it brings about the next Weimar republic. There is such a thing as moderation, you know.

This sort of argumentative style is depressing. Lets ignore the numbers posted. Lets not discuss unambiguous, measurable metrics - lets just hand wave it all away as nonsense.

I posted an analysis where interest rates stayed at 4% for two years. This is neither 'raising interest rates so hard,' nor 'being so lax.' 

Frequentlyhere said:

The far more likely course of events is that the Fed have already allowed high inflation to erode some of their liabilities (and it may be that moderately high inflation continues to do that for a while longer), they're now slowing that process down by raising interest rates, and at some point either brought about by demand destruction or potentially maybe some lynchpin of the financial system showing strain, or both, they'll stop rising rates and perhaps cut them (and perhaps yes, god forbid, print money too).

This is only a reasonable course of analysis if you genuinely believe that the fed can at any point get interest rates above inflation. Positive real rates are necessary to the proper allocation of capital. 

This seems highly unlikely with inflation at 10%, interest rates at 4% and debt to GDP pushing 130%+

Frequentlyhere said:

To make it your base case not only that the World's reserve currency will effectively fail, but also that as a result we'll all pile into an asset class that's shown itself to be hilariously awful in so many ways, is just...well....quite something.

Every world reserve currency in the past has failed, and lost its monetary premium along the way.

It seems far more erroneous to make it your base case that the USD will be the worlds reserve currency forever.

Frequentlyhere said:

Fiat currencies are longstanding money instruments backed by history, Governments and their armies that we all use every day.

History? "Its always had value, therefore it must always continue to have value." Incredibly flawed thinking and I can list numerous examples of monetary instruments that have lots of history that collapsed suddenly.

Governments? Not sure I would favourably compare the competence of the current class of political leaders compared to those from say 100 years ago. Re-election rates are at all time highs and satisfaction with government is at all time lows. Something in that.

Armies? Do you believe that turning an army on its own people to enforce use of a certain currency is a valid method of governance? If the answer is no, then I'm not sure what an army has to do with the value of the £.

Frequentlyhere said:

I'm not sure where to begin with your comparison of the fiat currency system with FTX. Perhaps to state the obvious, they're a little bit different?

The comparison is that if everyone tried to withdraw their money from a cash machine tomorrow, Banks would be in as much trouble as FTX is/was. I'm not defending what FTX did, but they cashed out $6B in 72 hours before stopping withdrawals - there aren't many national banks that could actually do that.

Frequentlyhere said:

Anyway, the irony in all of this is that the only thing being destroyed by higher inflation and associated monetary policy that you're ostensibly so concerned about is...lo and behold.. not the $ or £ but Bitcoin and the rest of crypto.

What use is avoiding 10% inflation in pounds if you've swapped it for an asset which has dropped by 75%+ in the same time period?

I didn't expect anything different.

But my investment horizon isn't 1 or 2 years.

Frequentlyhere said:

If I want to send money around the globe, I have a revolut account for that. I can exchange one currency fee-free for another, and send it *instantly* to someone else. Or I can use paypal. Or Wise. Or my bank account. etc etc.

Revolut doesnt send money instantly to anyone. Neither does your bank account. By using this method of comparison, you are either showing you don't understand how modern banking works or you are attempting you use peoples ignorance to support your point of view. Changing an entry on a spreadsheet is not 'sending' anything.

Frequentlyhere said:

The intermediary third party involved in those transactions is not a bad thing. That third party is there so that I'm less likely to send my money to a fraudster, or to the wrong person by mistake, or to compensate me if I buy a good/service not delivered, or if I lose my password/access to the platform I use.

None of these protections exist with bitcoin, and the end to end process to actually go from one person sending £ to someone in the US to spend in $ is much longer and more expensive to perform. Besides, why would you even bother if it's an appreciating asset? 

For most people. For those of us with a brain and a desire to take responsibility, Bitcoin offers the ability to do this without paying a fee to the middle processor (the bank). I transfer Bitcoin & Ethereum to many of the people I do business with in the US, Germany, Dubai & Indonesia. These are legitimate businesses, but I value the ability to do this without being asked millions of questions by my bank and then being charged £30 for the privilege of sending the money anyway.

The last sentence is prescient and to be expected. Gresham's law.

Frequentlyhere said:

But that's all irrelevant anyway, as with how it's currently perceived if you offered someone on the other side of the World to pay for a good/service in Bitcoin they'd probably think you have something to hide and also wouldn't have a clue how to accept if even if they didn't think that. And by the time it arrived you'd have to send more to cover for it falling 5% in the course of an afternoon!

I have no idea why people always use this example with it falling by 5% in an afternoon. One would imagine that an asset which has gone from cents to $70k would, in a random walk on any given day, be more likely to increase by 5%.

Frequentlyhere said:

This is the problem with all of Bitcoin's use cases. When you get to the detail of it, It serves no purpose that isn't already done better, except for criminal transactions and ransomware.

You're not getting to any detail though. You are creating arguments based on what you want to be true rather than what is true.

If you genuinely believe that your internet banking app is 'sending money' within 10 minutes then you're never going to understand the value proposition of Bitcoin.

If you genuinely believe that middle man processors are a good thing and that their cost should be shared over everyone, even those competent enough to use a more adult system or that middle man processors can always be trusted (a symptom of your privilege of living in a western country perhaps) then you'll never understand the value proposition of Bitcoin.

Exodi said:

You must be having a wind up. Every other week we see a multi-billion pound crypto firm collapse, at this point it's just business as usual. I'm not sure what confidence there is to knockback - the only people who remain steadfast in their loyalty are the crypto bros. Western governments wouldn't even humour the idea of considering adoption.

And yet, no bail outs. no use of taxpayer funds to prop up failing companies. This is a feature, not a bug. 

The resilience of this system will evolve over time to be more resilient than traditional finance. It will outcompete.

User232002

Frequentlyhere said:

We're not in Lebanon or the Democractic Republic of the Congo are we though, Danny? 

What kind of argument is this!?

There are tens of millions of people around the world in need of a money that can be self custodied and transferred peerlessly to others. Belittling this fact only shows your prejudice & privilege. I've been very clear over the two years I've been posting here that adoption will begin from poorer countries up because more modern countries have stronger property rights. Adoption is these countries is growing at insane rates - I've seen articles quoting 800 - 1500% / yr in Turkey (but you went on holiday to Cyprus and didn't see any Bitcoin being used, so you don't believe it).

That said, given the actions of many western governments over the last two years, perhaps having a sovereign store of value should be something that many westerners should be putting on their agenda too.

hallmark

One of the problems for Bitcoin believers is simply it's been too successful, and everytime it has been it's supporters immediately revise their expectations upwards (as we saw when BTC was close to $70,000 and people instantly began talking about it going to $1,000,000)

I believe BTC was $0.09 when it launched in 2009.  So some basic maths shows us that even if it had doubled in value every year it would still only be worth $737.

I suspect in 2009 even the most ardent fans would have settled happily for BTC doubling in value every year for the next 13 years.  So it's hard to see WHY $17,000 is cheap now, just because it was more expensive before.

Anything is possible though, and BTC sub-$1,000 or BTC >$1,000,000 could both happen and probably at least one of them will at some point.

Frequentlyhere

You didn't expect anything different, Darren?  

"darren232002 said:

if it ever went back below $20k my beliefs are invalidated and I'd be selling everything I have"

Re: The Fed, you indeed provided lots of numbers, but they weren't particularly relevant because you had missed the bit where, as several posters had pointed out to you, it was indeed perfectly sustainable because the Govt's debt is being inflated away

I think you also misunderstand inflation and interest rates. Inflation is a backward looking measure whilst interest rates act forward.  We have 11% inflation now, but that doesn't mean interest rates need to be >11% now. 

Even if we somehow knew what inflation would be in a year's time, it doesn't mean that the interest rate needs to be set to that level now, I just don't accept your premise. They only need to be set at a level which reduces inflation by dampening demand.  

All of which you seem to want to tie to bitcoin, but I still really don't see how it does. We're living through high inflation now, and it's just not doing any favours to bitcoin whatsoever. Long term, early days, I know I know.

Even if somehow the Fed fails in it's mandate to reduce inflation though (I really doubt it), then the idea of people jumping into an asset that has dropped by 3/4 in value in the same period seems very very distant.

Re: "Armies? Do you believe that turning an army on its own people to enforce use of a certain currency is a valid method of governance?"

No, but I believe that when rational people choose what form to spend, store and invest their money in, they're mindful of what the prevailing Government of the day is and the power that lies behind that.

People who are less mindful of that have sometimes ended up losing their life savings to frizzy haired chancers or resorting to hiding their 'money' in a popcorn tin to be taken away by the authorities whenever they decide it doesn't belong there.

Frequentlyhere

Re: developing countries, I don't accept your idea that "tens of millions of people around the world in need of a money that can be self custodied and transferred peerlessly to others".

We were talking about El Salvador earlier in the week. If there's such a pressing need as you say, why is that it Bitcoin has been shunned there despite being foisted upon the population formally?

It's barely used day to day, it's not used for remittances (I supplied some links on that with actual % numbers and everything - I think Bitcoin remittances had fallen to <2% of all remittances there).  And that is an economy that really does do a lot of remittances for it's size.

I will accept that there's been some uptick in usage of BTC where people are suffering very high inflation, in places like Turkey. That reflects a sad state of affairs though, and a suboptimal choice. If people have been trying to escape inflation in Turkey by buying BTC recently, then they've still gone and lost 75% of their money versus buying dollars or even gold. Is that what success looks like?  How far do these unfortunate people have to zoom out to be able to keep their store of value? Until the Fed pivots?

They've also potentially lost a lot more if they chose to use an exchange which went up in a puff of smoke - not everyone is as smart as you, Darren. Some don't even use computers at all, so they're hardly going to be up to speed with all of the faff of being your own bank.

Frequentlyhere

Last points, am genuinely a bit confused as to why you want to draw this technical distinction of how exactly money is paid and settled around the World.

Why should we care if a Revolut or credit card payment isn't technically settled for however long it is?  Providing the recipient can instantly use their funds and the person can instantly take away and use their product/service, why does that matter? 

Re: the value of intermediaries, I guess we'll have to agree to disagree. It's my view that the general population of the World value greatly the features of safe storage, deposit protection, fraud protection and goods/services purchase protection that using Government supported bank accounts/credit facilities bring.  I think these are valued far more than the value of being your own bank, which notably vanishingly few people seem keen to try and do.

Frequentlyhere

As an aside, the more we have this debate the more I feel you're just presenting the arguments of some sort of neo-Gold bug, Darren.

Taking a look at investopedia,

"Although people differ in their reasons for being a gold bug, they commonly share a perception that the purchasing power of fiat currencies will decline due to factors such as inflation, expansionary monetary policy, and the rising national debt"

Sounds pretty similar to the conversation just had, no? People have been at this same set of arguments for decades.

uk1

In order to give a little light relief to those that are angst ridden for reasons of  our own  making I’d like to inject a little lightness from Jeremy Clarkson.  I may be even more cluless but I do so hope this link to the article which I am allowed to share works and amuses.

 My market speculation paid off: not buying cryptocurrency 

https://www.thetimes.co.uk/article/jeremy-clarkson-my-market-speculation-paid-off-not-buying-any-crypto-xzxnfzn9c?shareToken=8192c3c35dc6c043da68c9c5240f3490

User232002

Frequentlyhere said:

You didn't expect anything different, Darren?  

"darren232002 said:

if it ever went back below $20k my beliefs are invalidated and I'd be selling everything I have"

Here is what I posted on 24th February 2022 in response to comments that Bitcoin has gone down as inflation had gone up.

darren232002 said:

Thrugelmir said:

Flakey holders it appears, running for the exit doors it seems. First sign of geo political tensions and the stable reserve currency Bitcoin sheds 12%.  Meanwhile gold rises over 2%. 

(1) Nobody expected anything different. We literally said about 5 pages back that Bitcoin is correlated to tech/growth right now but expect a dislocation at some point in the future.

The argument has never been inflation go up therefore Bitcoin go up.

Frequentlyhere said:

Re: The Fed, you indeed provided lots of numbers, but they weren't particularly relevant because you had missed the bit where, as several posters had pointed out to you, it was indeed perfectly sustainable because the Govt's debt is being inflated away

By ignoring the numbers presented, you continue to attempt to have a qualitative discussion about a fundamentally quantitative subject. The demise of fiat currencies is qualitatively assured by the nature of human greed, but at this point it is also mathematically assured too.

So, any debt is sustainable so long as interest rates are lower than inflation right?

Cool. Just asking, how did the market react when UK govt wanted to borrow a load of money at a rate lower than inflation?

Actually, given that debt is sustainable so long as inflation is high - how about we max out the country credit card right now? Go nuts right... But wait, why is every political party talking about austerity and budget cuts?

Of course I'm being dramatic to make a point - debt can be unsustainable even when interest rates are below inflation. The point I have continually made is that govts around the world are now running deficits continually to pay interest on their debts. They are printing money in order to do this. When this happens, the value of the currency is down only, and the value of hard assets is up only.

Here is this in graphical form. And this comes from the US govt, so its highly likely to be a rose tinted picture. As I've said before, tax revenue usually runs around 10% of GDP, so around 2035 there literally won't be any money left over to actually pay for anything else without printing it.

Frequentlyhere said:

Even if we somehow knew what inflation would be in a year's time, it doesn't mean that the interest rate needs to be set to that level now, I just don't accept your premise. They only need to be set at a level which reduces inflation by dampening demand.  

All of which you seem to want to tie to bitcoin, but I still really don't see how it does. We're living through high inflation now, and it's just not doing any favours to bitcoin whatsoever. Long term, early days, I know I know.

Even if somehow the Fed fails in it's mandate to reduce inflation though (I really doubt it), then the idea of people jumping into an asset that has dropped by 3/4 in value in the same period seems very very distant.

Oh, I suspect you are correct. For now.

In Adam Fergusson's 'When Money Dies,' there is a story of a rich Austrian woman deciding to keep her wealth in her native currency on the assumption that the initial decrease in the value of the currency will right itself in due course and if it doesnt, she will be able to swap out of the currency at a later time anyway. When she visits the bank some months later having seen the value of the currency plummet, the bank manager informs her that unfortunately nobody will take her Austrian Krone any more.

Frequentlyhere said:

Re: "Armies? Do you believe that turning an army on its own people to enforce use of a certain currency is a valid method of governance?"

No, but I believe that when rational people choose what form to spend, store and invest their money in, they're mindful of what the prevailing Government of the day is and the power that lies behind that.

If you aren't willing to use the army, it has no coercive threat. 

Frequentlyhere said:

Last points, am genuinely a bit confused as to why you want to draw this technical distinction of how exactly money is paid and settled around the World.

If you knew this, why were you, in a previous post, stating that money can be sent 'instantly'?

When you mislead, it calls in to doubt all of the arguments you are presenting.

Frequentlyhere said:

Why should we care if a Revolut or credit card payment isn't technically settled for however long it is?  Providing the recipient can instantly use their funds and the person can instantly take away and use their product/service, why does that matter? 

Because the speed of a moneys transfer is related to the economic benefit it can provide a society.

Bitcoin isn't trying to be a currency; its trying to be money. Money is an economic good that sends value in to the future. Currently, money is treasuries and gold. Bitcoin settles far faster than these across international borders and for large value transfers. 

Settlement is relevant to trustlessness. There's no proof that governments own the amount of gold they say they do and this arises because it is expensive and time consuming to ship gold frequently around the world. Treasuries can't be trusted because Russia just had $600BN marked down to zero because another country disagreed with its actions. There is no need to trust in a Bitcoin system, you can verify. The comparison to Revolut is a red herring by people that think a measure of Bitcoins success is whether you can use it to pay for a coffee. 

Frequentlyhere said:

As an aside, the more we have this debate the more I feel you're just presenting the arguments of some sort of neo-Gold bug, Darren.

Taking a look at investopedia,

"Although people differ in their reasons for being a gold bug, they commonly share a perception that the purchasing power of fiat currencies will decline due to factors such as inflation, expansionary monetary policy, and the rising national debt"

Sounds pretty similar to the conversation just had, no? People have been at this same set of arguments for decades.

Gold was an approximation to a solution to a problem humanity had; the need for a hard, unchanging asset that can send value in to the future.

Bitcoin beats gold in almost every conceivable metric. Quicker to transfer, more divisible, more fungible, more verifiable.

If Bitcoin out competes Gold at being Gold, ignoring any other mechanism of value accrual, then it would win a market cap of $10T giving Bitcoin a value of $500k+ / coin.

Seems bullish.